Busted: Bankers and The Global Economy

February 27, 2008

The Morality of Financial Literacy

Filed under: banking, central bank, credit, federal reserve, investment, money — Tags: , , , , , , , , — digitaleconomy @ 4:44 pm

2132654-internet.jpgFed Governor Fred Mishkin stated today that “There can hardly be a better time to make the case for economic and financial literacy than right now…We face a downturn in our housing industry fueled, at least in part, by unwise mortgage borrowing and, at times, abusive lending practices. Improving consumers’ knowledge of the home mortgage process will better equip them to avoid unsuitable mortgages in the future.” While this speech was largely aimed at a new public service program for the everyday financial consumer, it could have just as well been aimed at the bankers and financial gurus that ply their trade every day.

The Federal Reserve is on a mission to increase public knowledge and appear more consumer friendly, garnering helpful bits of consumer advice for education. With the Federal Reserve’s recent elevation of power within and around this economic system, the Fed has now graduated to the role of the nation’s “financial grandfather”.

What is this financial literacy that is so important? ‘Economic and financial literacy’ is the ability to identify economic problems, alternatives, costs, and benefits. This literacy is able to analyze the incentives at work in economic situations and examine the consequences of changes in economic conditions and public policies. This literacy involves collecting and organizing economic evidence and weighing costs against benefits.’ While most average folks meet the first part of the definition pretty well, the last part of the definition can be especially daunting, especially when you lack critical thinking skills. Who doesn’t lack the skills described in some way? When you realize that this is part of a consumer campaign, you also quickly realize that the Federal Reserve also seeks to educate the very people that put this economy in the mess it is in to begin with. Based on what the Fed has said and the definition involved, you can see that most banking and financial types fall far short of meeting optimal requirements just like you might.

There is one curiosity. In each document that is officially proposed by the Federal Reserve in the last several years, you will find no hint of morality, at least not directly. The money business is simply a process. There is no talk of accountability in any true sense or a display of right or wrong. Never once have I heard the word “integrity” in context with banking and finance. That is the problem. The definition of economic and financial literacy is amoral. It can be applied any number of ways. This literacy theory can be applied for the common good of mankind or using some kind of national responsibility. This is probably the perception of most Americans. When you listen to the high-minded philosophy of the founding father of this country, you simply draw the conclusion that those ideals are still alive and well. Within that same theory also reside the very seeds of destruction. All the constituent parts of that definition fit very well in the current mindset of the banking and financial industry: the desire for wild profits and good times. The literacy theory can be applied in the most selfish and manipulative ways depending on the mindset of the individual exercising it. Live for today and to heck with tomorrow.

greed-internet.jpgThe Federal Reserve clearly knows the truth behind the scenes. They aren’t beating their brains out with the banking community. They figure that since there are a few torched fingers around from banking avarice, a temporary lesson might be learned for the short-term while the lawmakers figure out the latest regulations to make it all better so that the world can be saved. How much more effective to educate the everyday man so that he can keep himself out of trouble? Arm the little guy with more information while putting more responsibility on him to do the right thing. If you put enough sage financial advice out there, maybe you can blame the consumer. The new spirit of financial education is let the buyer beware. The bankers and financial gurus are going to forget the lesson of this last financial tsunami soon enough and will find a new way to stretch the rules in their favor. In the meantime, maybe some of the sage advice being dispensed will stick and those consumers that aren’t living for today might heed the call to responsibility. You think?

The Federal Reserve isn’t interested in morality; just making more money and putting a kind face on it. That is corporate elitism at its very finest.

E. Manning

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